Stable Funding for NBFCs – The Roadmap India’s Lending Sector Cannot Ignore
The conversation around Stable Funding for NBFCs has taken centre stage in India’s financial system. As non-banking financial companies continue their rapid growth, one recurring theme is becoming increasingly clear: NBFCs cannot maintain long-term momentum unless they have access to predictable, low-volatility funding channels.
This point was strongly reinforced by Jairam Sridharan, Managing Director of Piramal Finance, who discussed the company’s ambitious plan to grow its assets under management (AUM) to ₹1.5 lakh crore by 2028, and why Stable Funding for NBFCs will define the next stage of sector evolution.
Piramal Finance plans to unlock up to ₹2,500 crore by divesting stakes in select insurance and fintech holdings, strengthen its unsecured lending portfolio, expand the MFI business, and explore gold loan opportunities. However, Sridharan makes it clear that no matter how strong the business model is, Stable Funding for NBFCs remains the backbone for sustainable expansion.
Piramal Finance’s Expansion Plan and the Funding Foundation Behind It
Piramal Finance, now independently listed after its merger with Piramal Enterprises, is aiming to double its AUM to ₹1.5 lakh crore over the next four years. Beyond traditional equity capital, the company is looking at balance-sheet unlocks, strategic investments, and long-term lending products.
But at the heart of this growth plan lies a fundamental truth:
Without Stable Funding for NBFCs, businesses cannot plan growth, pricing, or long-term liability commitments with confidence.
NBFCs typically depend on bank borrowing, capital markets, securitisation, and short-term instruments. This exposes them to liquidity shocks, interest-rate cycles, and market volatility. Sridharan points out that the industry has matured significantly, but the structural ability to mobilise long-term stable funds remains limited.
This is precisely why Stable Funding for NBFCs must now become a policy priority.
Are Banks a Threat? Why NBFCs Hold a Distinct Position
When asked whether NBFCs face risks from banks aggressively expanding into retail lending, Sridharan offered a clear distinction:
Why NBFCs Continue to Thrive
- NBFCs excel in last-mile delivery
- They serve customers with limited digital footprint
- Product innovation is stronger at NBFCs
- They specialise in serving the informal sector
Even though regulatory arbitrage between banks and larger NBFCs has reduced, Stable Funding for NBFCs will ensure that NBFCs retain the flexibility to innovate and serve niche markets that banks typically avoid.
RBI and NBFCs – What the Sector Still Needs Most
Sridharan acknowledges that regulators have already addressed many concerns of the NBFC sector. However, the biggest unmet need today is:
A Strong and Sustainable Liability Structure
This means:
- Longer-tenor borrowing channels
- Liquidity windows for NBFCs
- Permission (at least for top-tier NBFCs) to access quasi-deposit products
- A diversified liability profile
All these factors point again to the core need for Stable Funding for NBFCs, which would help decouple their growth from short-term market fluctuations.
Should NBFCs Become Banks? Does It Solve the Stability Issue?
This debate resurfaces often, but Sridharan’s view is nuanced and practical.
Why Most NBFCs Cannot Handle Deposit Mobilisation
Mobilising deposits requires:
- Deep trust
- High governance standards
- Risk management frameworks
- Strong internal controls
Only 10–12 NBFCs in India may have such capabilities. The rest may not be able to handle this responsibility.
Banking Licence: Pros and Cons
A banking licence provides:
- Access to stable deposits
But introduces: - CRR, SLR requirements
- Priority sector lending obligations
- Lower ROA
- Higher compliance burdens
Therefore, even though a banking licence offers liability stability, it also dilutes profitability. This reinforces why Stable Funding for NBFCs must emerge through a framework tailored specifically for NBFCs, not by forcing them into the banking model.
Foreign Investor Interest – A Positive Signal for NBFC Stability
Foreign investors continue to show strong confidence in India’s BFSI sector. According to Sridharan:
- Long-term interest from Asian investors remains high
- Governance standards in NBFCs are improving
- Regulator openness is encouraging foreign participation
This inflow of strategic capital strengthens the push for Stable Funding for NBFCs, as it gives companies more options beyond traditional market borrowings.
Capital Requirements for Piramal Finance – What the Balance Sheet Reveals
Piramal Finance has sufficient capital for the next 12 months. However, the company is exploring value unlocks to support future loan book expansion.
Key Unlocking Opportunities
- Stakes in Shriram Group life insurance
- Stake in Shriram General Insurance
- 10% stake in Fibe (likely to go public soon)
These assets could unlock ₹2,000–2,500 crore. With leverage, this can support ₹10,000 crore of additional lending.
But even with capital unlocks, Stable Funding for NBFCs will determine how efficiently such growth can be translated into real lending.
Gold Loans, Microfinance, and NBFC Growth Horizons
Gold Loans
Piramal Finance considered acquiring a gold loan company but stepped back due to high valuations. They remain open to acquisitions if pricing aligns.
Microfinance
The company plans to grow its MFI book substantially, as it plays a crucial role in achieving the targeted unsecured loan growth of 17–24%.
But here again, growing these diversified loan books requires Stable Funding for NBFCs, especially because unsecured and MFI portfolios are sensitive to liquidity cycles.
What Could Slow Down NBFC Growth? Emerging Sectoral Risks
Sridharan cautions that NBFCs must watch two important macro variables:
1. Stress in Micro-SME Segment
The lowest end of the MSME segment is struggling. Whether this is a temporary slowdown or a deeper structural concern remains uncertain.
2. Employment Vulnerabilities in India’s Formal Sector
A small group—just 13 million workers—earns nearly 50% of India’s formal wages in sectors like:
- Tech
- IT
- GCCs
- BFSI
- Customer support
If AI disrupts these segments, retail lending could face headwinds. This makes Stable Funding for NBFCs even more essential so that lenders can withstand short-term repayment stress without liquidity panic.
AI and Macro Trends – Will India Gain or Lose?
Sridharan highlights that the impact of AI can go either way:
India may become a global service delivery hub—or face job displacement.
This uncertainty makes it even more important for NBFCs to have Stable Funding for NBFCs, which acts as a cushion against unpredictable shocks.
Stable Funding for NBFCs – A Policy Priority for the Coming Decade
In conclusion, the sector’s next phase will be shaped by:
- Long-term liability flows
- Stable funding frameworks
- Well-governed NBFCs gaining differentiated access
- Reserve Bank liquidity windows
- Foreign strategic investor participation
- Capital unlocking by large NBFCs
For NBFCs such as Piramal Finance, securing Stable Funding for NBFCs will determine not just growth speed, but resilience, pricing, and balance-sheet strength.
Conclusion: Stable Funding for NBFCs Is No Longer Optional – It Is the Future
The insights shared by Jairam Sridharan offer a clear roadmap: India’s NBFC sector is mature, ambitious, and ready for scale. But none of this is sustainable unless the industry builds a Stable Funding for NBFCs ecosystem that mirrors long-term reliability.
As India moves deeper into formal credit expansion, the availability of Stable Funding for NBFCs will remain the single most important factor shaping the health, competitiveness, and stability of the sector.
Based on recent developments reported by Economic Times.
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